Telefónica and the retreat of Latin America 30 years later

MADRIDFrom euphoria to disenchantment. This is how Telefónica's withdrawal from Latin America could be summed up more than 30 years after making its first investment. Its entry into the region took place in the 1990s thanks to the privatization of the business by the state, but also on the other side of the Atlantic Ocean, where many countries were undergoing privatization processes for state-owned telecommunications operators. "Telefónica has been one of the driving forces behind the development of Latin America and will continue to be so because we are convinced that the development of telecommunications in the region will be very important in the coming years," the then president of the company argued in 2004. telecommunications, César Alierta.

This week, however, it has been once again confirmed that the strategy championed by Alierta is now a dead letter. Telefónica has announced the sale of 100% of its Uruguayan subsidiary to Millicom Spain for approximately €387 million. This transaction is now pending regulatory approval and is part of a divestment process in the region that is expected to accelerate.

But let's take it one step at a time. This withdrawal strategy began in 2019 under the leadership of José María Álvarez-Pallete. At that point, only Brazil was left out of the equation—in fact, along with Spain, Germany, and the United Kingdom, they account for the bulk of the company's business. telecommunications–. The first countries to suffer the change of course were Guatemala, El Salvador, Costa Rica, Nicaragua, and Panama. In the case of the first two, the departure of Telefónica benefited América Móvil, owned by Carlos Slim, the richest businessman in Mexico and Latin America. These movements initiated in 2019 have been replicated strongly in recent months, coinciding with the arrival of Catalan Marc Murtra to the presidency, who has already stated that, on the contrary, he is looking for a formula for growth in Spain and Europe.

In Argentina, Despite the tension with the government of Javier MileiTelefónica has closed the sale of its subsidiary to Telecom, owned by Grupo Clarín and businessman David Martínez, for approximately €1.19 billion. In the case of Colombia, it has agreed to transfer the business (the transaction is pending regulatory approval), while in Peru, the sale of the company has been completed for a paltry €900,000 due to the financial crisis of the subsidiary, which remains mired in bankruptcy proceedings. Likewise, Mexico remains in the spotlight for bets on this return trip, while in the case of Chile—the first Latin American country where Telefónica invested in 1989—Ecuador, and Venezuela, the company has not taken any steps so far. For the moment, all of this has meant that the telecommunications It will close the 2024 financial year with losses of €49 million, and the same trend continues in 2025: between January and March, it recorded losses of €1.731 billion.

Is this the end of the expansionism of the 1990s?

When Telefónica's executives stopped seeing any green shoots in Latin America—for a time, the bulk of its revenue came from this market—they pointed to geopolitical uncertainties, the macroeconomic context, the countries' regulatory framework, and the rise of competition as the reasons pushing them to assume a 180-degree turn from the Great Recession. Added to this was the volatility of countries' currencies, which didn't help a Telefónica overwhelmed by debt and with a plummeting stock price: in 2019, the share price fell below €6, a disastrous drop compared to the nearly €22 price it had in 2008.

Telefónica, however, is only a reflection of the process that many other Spanish companies have gone through—mainly the crown jewels of the Ibex 35. The unstoppable wave of privatizations initiated in the State under the governments of Felipe González (PSOE) and José María Aznar (PP), who was in charge of completing it, went hand in hand with the drive for expansionism. This desire, championed above all by Aznar, saw the genesis of the internationalization of names such as Telefónica in Latin America, but also Endesa, Gas Natural, and Agbar (the presence of all of these in the region has been disappearing over the years).

In the case of telecommunicationsAlierta himself estimated the investment in the region between 1990 and 2011 at "108 billion", as stated in an article byThe CountryHowever, the process has not been without its shadows: the acquisitions allowed it to develop telephone networks, gain customers, and gain a foothold in a strategic sector, but there were always doubts about whether it enjoyed privileges, such as acquiring businesses at below-market prices. Over the years, many of them experienced what Telefónica is experiencing today.